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Post by Broozer on Jul 26, 2023 0:56:10 GMT
Hi all, I have Vanguard Wellesley in a taxable account -- I've had it for 10 years and I want to get out. A few years ago they changed it to an "institutional only" fund and I cannot add any money to it. All gains and interest have been re-invested up until about a year ago.
As I understand it, the cost basis per IRS rules includes all re-invested gains, so according to Schwab my cost basis is a bit higher than the current value. Does that mean if I sold it I would not owe any taxes?
I've talked to two different people at Schwab, neither seems to know much more than I do about it. My tax woman is out-of-touch; I am going to dump her, so at this point I don't know what's going on. Finding competent tax preparers is not an easy task. Been through it numerous times, and here it is again.
I'd like to know if I can dump the whole thing this year and not owe any taxes, or if I should break it up into several years. SOMEBODY must know the approximate answer to this.
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Post by Mustang on Jul 26, 2023 1:25:00 GMT
For assets owned more than a year if cost is greater than revenue then its a long-term capital loss. No taxes are due for a loss. The company will list all of this information on the 1099.
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Post by yogibearbull on Jul 26, 2023 12:53:58 GMT
Your brokerage should indicate the correct cost-basis. You paid taxes on distributions annually and those are added to the cost-basis on reinvestments (major brokers will do this automatically) so that you don't pay double-tax. Many are indeed surprised by the tax due on sale when they use Growth-of-10K to assess holdings (but those aren't for tax considerations).
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Post by steadyeddy on Jul 26, 2023 16:52:31 GMT
Hi all, I have Vanguard Wellesley in a taxable account -- I've had it for 10 years and I want to get out. A few years ago they changed it to an "institutional only" fund and I cannot add any money to it. All gains and interest have been re-invested up until about a year ago.
As I understand it, the cost basis per IRS rules includes all re-invested gains, so according to Schwab my cost basis is a bit higher than the current value. Does that mean if I sold it I would not owe any taxes?
I've talked to two different people at Schwab, neither seems to know much more than I do about it. My tax woman is out-of-touch; I am going to dump her, so at this point I don't know what's going on. Finding competent tax preparers is not an easy task. Been through it numerous times, and here it is again.
I'd like to know if I can dump the whole thing this year and not owe any taxes, or if I should break it up into several years. SOMEBODY must know the approximate answer to this.
, if your cost basis is larger than current value you are selling this holding at a loss - so no additional taxes are owed. In fact, the loss will reduce any capital gains you might have in 2023 when you file your taxes next year. My 2 cents (not advice) is that NOW is not a good time to sell VWIAX since the rate hike cycle is almost over and bonds would recover over the next year or two. Something to think about. Also, VWIAX is admiral class shares and not institutional class. Schwab and others won't allow you to add to it but you can take it back to Vanguard and have them convert to VWINX should you want to keep it and keep adding $ to it. |
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Post by Broozer on Jul 27, 2023 1:09:42 GMT
Your brokerage should indicate the correct cost-basis. You paid taxes on distributions annually and those are added to the cost-basis on reinvestments (major brokers will do this automatically) so that you don't pay double-tax. Many are indeed surprised by the tax due on sale when they use Growth-of-10K to assess holdings (but those aren't for tax considerations). Red: Aha, I didn't know that, but it makes sense. I guess I should trust Schwab's numbers then.
Thanks Yogi.
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Post by Broozer on Jul 27, 2023 1:28:17 GMT
Hi all, I have Vanguard Wellesley in a taxable account -- I've had it for 10 years and I want to get out. A few years ago they changed it to an "institutional only" fund and I cannot add any money to it. All gains and interest have been re-invested up until about a year ago.
As I understand it, the cost basis per IRS rules includes all re-invested gains, so according to Schwab my cost basis is a bit higher than the current value. Does that mean if I sold it I would not owe any taxes?
I've talked to two different people at Schwab, neither seems to know much more than I do about it. My tax woman is out-of-touch; I am going to dump her, so at this point I don't know what's going on. Finding competent tax preparers is not an easy task. Been through it numerous times, and here it is again.
I'd like to know if I can dump the whole thing this year and not owe any taxes, or if I should break it up into several years. SOMEBODY must know the approximate answer to this.
, if your cost basis is larger than current value you are selling this holding at a loss - so no additional taxes are owed. In fact, the loss will reduce any capital gains you might have in 2023 when you file your taxes next year. My 2 cents (not advice) is that NOW is not a good time to sell VWIAX since the rate hike cycle is almost over and bonds would recover over the next year or two. Something to think about. Also, VWIAX is admiral class shares and not institutional class. Schwab and others won't allow you to add to it but you can take it back to Vanguard and have them convert to VWINX should you want to keep it and keep adding $ to it.  Your 2 cents: You're saying that I should wait to sell until bond prices go back up? What would that do to the cost basis?
Schwab lists VWIAX as "institutional customers only" starting as of a few years ago, but maybe that's just the deal they have with Vanguard. Back when they did this, I was pondering having it converted to VWINX but couldn't get any clear ideas on tax consequences so I never did.
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Post by steadyeddy on Jul 27, 2023 2:36:35 GMT
Broozer , if your cost basis is larger than current value you are selling this holding at a loss - so no additional taxes are owed. In fact, the loss will reduce any capital gains you might have in 2023 when you file your taxes next year. My 2 cents (not advice) is that NOW is not a good time to sell VWIAX since the rate hike cycle is almost over and bonds would recover over the next year or two. Something to think about. Also, VWIAX is admiral class shares and not institutional class. Schwab and others won't allow you to add to it but you can take it back to Vanguard and have them convert to VWINX should you want to keep it and keep adding $ to it. Your 2 cents: You're saying that I should wait to sell until bond prices go back up? What would that do to the cost basis?
Schwab lists VWIAX as "institutional customers only" starting as of a few years ago, but maybe that's just the deal they have with Vanguard. Back when they did this, I was pondering having it converted to VWINX but couldn't get any clear ideas on tax consequences so I never did.
When bonds recover, the odds are Wellesley will be a profitable trade for you - no tax loss. |
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Post by Chahta on Jul 27, 2023 12:12:09 GMT
For assets owned more than a year if cost is greater than revenue then its a long-term capital loss. No taxes are due for a loss. The company will list all of this information on the 1099. Not following this. Cost and revenue are related how? Is it cost is greater than final value? |
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Post by Mustang on Jul 28, 2023 10:06:32 GMT
For assets owned more than a year if cost is greater than revenue then its a long-term capital loss. No taxes are due for a loss. The company will list all of this information on the 1099. Not following this. Cost and revenue are related how? Is it cost is greater than final value? If you sell 1,000 shares @ $10 each then the revenue from that sale is $10,000. If of the cost of those shares is $11,000 then there is a loss. If you are selling only a portion of the shares owned then the inventory method used to track costs (first in first out, last in first out, or weighted average) comes into play because you have to decide which shares you are selling. |
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Post by Chahta on Jul 28, 2023 11:37:35 GMT
OK, I understand your use of revenue now. Just don’t hear it used as such.
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Your 2 cents: You're saying that I should wait to sell until bond prices go back up? What would that do to the cost basis?